Last time I wrote, I declared that Obama had the election in the bag, according to Intraders participating in the state markets. Since then, Obama's strength has only solidified. For the last two weeks, Intraders have been saying Obama is the more likely candidate to win in states totalling 364 Electoral Votes.
Today, even if we give McCain every state where Intraders have Obama's chances below 80%, Obama still gets 273 votes and wins. In other words, let McCain keep every red state even if it is 51-49. Further, take FL (where Dems are currently trading at 63), MO (at 67), NV (73), NC (58), OH (61), and VA (78) away from Obama and give them to McCain and Obama still wins.
So according to Intrade's state markets there is basically no chance McCain can put together the Electoral Votes he needs to wim. Indeed, my simulation has consistently been putting McCain's chances at well under 1%.
At the time of my last column two weeks ago, the price on the Obama national contract was about 65, and it has since moved to about 85. From a certain perspective, 99%+ seems too high for the chance of almost anything that is two weeks in the future, and you suspect something must be inconsistent. From another perspective, the best a predictor can do is give you an answer with near certainty well in advance of the event. Intraders in the state markets have basically no doubt.
The action then, is in the question of how many electoral votes exactly will each candidate get. Intrade has a collection of markets for that as well, and through the simulation, we can get a good picture of what the state markets have to say on the question. A trader might look at the national price of 85 on 2008.PRES.OBAMA and figure the price of the Obama wins >270 Electoral Votes ought to be close to the same. Further, a trader might see that Obama is “expected” to win 364 Electoral Votes and suspect that the price of Obama winning > 360 Electoral Votes (or McCain winning > 170) ought to be around 50. Indeed, that is about where the Intrade markets on Electoral Vote counts are trading.
But the state markets have more to say than that. I simulate the joint dynamics of the state markets out to election day and produce a distribution of how many electoral votes each candidate ultimately may win. We can compare that distribution (in pink) vs. the Intrade Electoral Vote Count Markets (in blue), for the Democrat:
And for the McCain, again my results from state markets in pink and Intrade's Elecotral College vote count markets for the Republican in blue:
Fundamentally, the state markets are saying something different than the national markets and the electoral count markets. The state markets are actually implying a quite well-settled race at this point (not much can happen that will actually swing a lot of electoral votes). In the price of the national contracts and in the distribution implied by the electoral count markets, we see that Intraders still demand a significant risk premium for the suspicion that something big may yet happen.